Behind the Headlines: Arab Boycott Failed to Break Israel, but Lifting It Could Bring Benefits

July 23, 1991

JERUSALEM (Jul. 22)

Israeli leaders have reacted angrily to an Arab proposal to end the economic boycott against Israel on the condition that Israel freezes settlement activity in the administered territories.

“Goyishe chutzpah,” were the words Deputy Foreign Minister Binyamin Netanyahu used to describe the offer, and Defense Minister Moshe Arens called it “more of a gimmick than a sincere proposal.”

Privately, however, the Israelis have cause for satisfaction.

The tradeoff proposed by oil-rich Saudi Arabia and concurred with by economically battered Jordan was an admission by the Arabs that, after four decades of military and economic pressure, Israel cannot be defeated.

It is a tacit acknowledgment that the Jewish state is an integral part of the Middle East and will remain so, a premise from which peace should logically follow.

The boycott has hurt Israel’s economy, but never crippled it. Its worst effects have been to inhibit foreign investments, not Israel’s trade with the rest of the world.

Much of the damage was cushioned by foreign aid, chiefly from the United States and from what had been West Germany until East and West Germany united last year.

Nevertheless, Israelis admit that had there been no boycott, their economy could have grown more robustly and the need for foreign aid could have been reduced by 10 percent, with savings of hundreds of millions of dollars annually.

The boycott has several levels. The primary boycott bans any form of trade or economic relations between the Arab League member states and Israel. It was broken only by Egypt, which signed a peace treaty with Israel in 1979.

The primary boycott predates the Jewish state. It was initiated against the Yishuv, the Jewish community in Mandate Palestine, in 1946, two years before Israel’s independence.

A secondary boycott developed over the years. Aimed first against non-Arab companies that traded with Israel, it was expanded to include companies that trade with companies which do business with Israel.

U.S. BEGAN FIGHT IN 1977

That is the basis of the notorious blacklist of hundreds of companies, published biannually by the Arab League Boycott Office in Damascus. It prompted many enterprises around the world to avoid business ties with Israel.

For years, such multinational giants as Pepsi Cola, Toyota and Nissan boycotted Israel.

According to Foreign Ministry sources, about a quarter of the big European corporations selling products to Israel refused to buy from Israel, even when the prices were competitive, for fear of repercussions from Damascus.

The boycott became a political issue in the United States. In 1977, Congress passed laws barring U.S. companies from complying with boycott rules, even if it meant losing contracts, exports and jobs. There was a corresponding increase in trade between the United States and Israel.

Four of the 12 European Community states — Belgium, France, Luxembourg and Holland — passed similar legislation. But to the extent that the other E.C. countries failed to pass anti-boycott laws, the struggle there was less effective.

The official Israeli view distinguishes between the primary boycott, which Jerusalem considers a legitimate issue for negotiations, and the secondary boycott, which has nothing to do with Israeli-Arab relations.

According to Israel, the secondary boycott should be dropped as a precondition for peace negotiations. By no means should the Arabs be rewarded by Israeli concessions on this issue, Israeli leaders believe.

The Arab boycott has always contained loopholes and means of circumvention. Its importance diminished in recent years until the boom in Soviet aliyah to Israel.

RECENT PROMISING SIGNS

A year ago, the Arab League instructed the boycott office to add to its blacklist all foreign companies that in any way assisted aliyah. These included airlines, shipping lines, hotels and housing construction companies.

But while the boycott itself made no dent on aliyah, the shortage of foreign capital investments in Israel reduced its ability to create jobs for immigrants, causing many to postpone their plans.

Since the Persian Gulf War, there have been many promising signs with respect to the boycott.

Toyota, Nissan and Mazda, under U.S. pressure and perhaps attracted by the Israeli market, have agreed to sell their cars in Israel.

Coca-Cola, unavailable in the Arab world for a generation because of its bottling plants in Israel, was recently taken off the blacklist, though not the publications of British-Jewish media magnate Robert Maxwell.

Now the Persian Gulf emirates, particularly Kuwait, indicate they will reduce their participation in the boycott, though they have not formally renounced it.